Question

In: Finance

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment,...

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. The firm has total assets of $2.9 million and net plant and equipment equals $2.4 million. It has notes payable of $150,000, long-term debt of $754,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Negative values, if any, should be indicated by a minus sign. Round your answers to the nearest dollar, if necessary.

  1. What is the company's total debt?
      $  

  2. What is the amount of total liabilities and equity that appears on the firm's balance sheet?
    $  

  3. What is the balance of current assets on the firm's balance sheet?
    $  

  4. What is the balance of current liabilities on the firm's balance sheet?
    $  

  5. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm's balance sheet.)
    $  

  6. What is the firm's net working capital? If your answer is zero, enter "0". Negative value, if any, should be indicated by a minus sign.
    $  

  7. What is the firm's net operating working capital?
    $  

  8. What is the monetary difference between your answers to part f and g?
    $   

    What does this difference indicate?
    -Select-The difference indicates Notes payable balance.The difference indicates Accounts payable balance.The difference indicates Current liabilities balance.

Solutions

Expert Solution

(a) Calculation of Total Debt
Total Assets = 2900000
Total common equity = 1550000
Total Assets = Total common equity + Total Debt
Total Debt = Total Assets - Total common equity
Total debt = 2900000 - 1550000
1350000
So, Total debt is $ 1,350,000
(b) Calculation of Total Liabilities and equity
Total Assets = Total liabilities and quity
Total assets = 2900000
So, Total liabilites and equity is $ 2,900,000.
(c ) Calculation of Current Assets
Total assets = 2900000
Net plant and equipment = 2400000
Total assets = Net plant and equipments + Current Assets
So, Current Assets = Total assets - Net plant and equipment
Current assets = 2900000 - 2400000
500000
So, Current Assets is $500,000.
(d) Calculation of Current liablities
Total Debt or liabilities = Long term debt + Current liabilities
So, Current liabilities = Total debt - Long term debt
Total debt as calculated above is 1350000
Long term debt = 754000
Current liabilities = 1350000 - 754000
596000
So, Current liabilities is $596000

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